Editor’s Note: Welcome to our weekly Analyst Angle section. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
What’s happening?
The increasing interest in “4G” technology in Latin America was clearly seen at Informa Telecoms & Media’s LTE Latin America 2013 event in Rio de Janeiro; the audience was twice as large as last year. Growth in the use of smartphones and data services has called operators’ attention to the need to upgrade their networks. And local governments are also pushing the technology through spectrum auctions.
It is estimated that smartphones use 35-times as much spectrum as feature phones, and tablets use 121-times as much, which makes a strong business case for LTE deployment as it reduces the cost of delivering mobile data. On the other hand, Latin American countries have a limited amount of spectrum available for mobile services, compromising the growth of mobile broadband penetration
(See Fig 1.)
Latin America, available spectrum and mobile broadband penetration, selected countries, 1Q13
Why does it matter?
Spectrum is crucial for the quality of mobile services, which continues to be a major issue in Latin America. Some regulators, such as Cofetel in Mexico and Anatel in Brazil, are implementing metrics for the quality of mobile broadband with fines if the operators fail to reach specified targets. Fourth-generation networks represent a great opportunity for operators to improve the quality of data services since they can improve operators’ 3G networks by migrating heavy data users to “4G” plans.
In addition, LTE spectrum can be used for fixed wireless broadband services. National broadband plans are being designed and implemented in several countries across the region, and LTE is being considered for broadband services in rural areas. In Brazil, the government auctioned the 450 MHz spectrum band, which is specifically for rural coverage, alongside the 2.5 GHz band. The technical characteristics of 450 MHz provide the opportunity to cover large geographical areas at lower costs.
What’s next?
Despite the favorable landscape for LTE in Latin America and the launch of 17 networks to date, “4G” adoption has been slow in Brazil, Mexico, Puerto Rico and other countries, mainly because of the strategy operators have adopted to offer the new technology, low coverage, high prices and the lack of smartphones. Apart from Puerto Rico, where operators launched “4G” services because the country depends on roaming revenues from the United States — which has the highest LTE customer base in the world — Latin American operators have typically launched “4G” services to position themselves as technology leaders.
Meanwhile, LTE for fixed wireless broadband can be promising, considering the low fixed broadband coverage and competition in many parts of Latin America. In Brazil, pay-TV operators Sky and On acquired LTE spectrum to offer fixed wireless broadband services. On, which launched its “4G” operation at the end of March, attracted about 1,000 users in less than a month in Itatiba, a city in the state of São Paulo. Most users churned from Telefónica, which dominates the local fixed-line broadband market.
What should you do?
Mobile broadband penetration is growing in Latin America and can help operators increase average revenue per user. Instead of launching LTE only to establish technology leadership, operators must have a strong business case for the technology, especially considering the high cost of LTE spectrum and networks.
As in Brazil, Latin American regulators should consider LTE for their national broadband plans. Ideally, they should support the same frequency band in the region for rural coverage to gain economy of scale for network equipment to reduce deployment costs, which in turn, will reduce service costs. The use of LTE can also increase competition in the fixed broadband sector, fostering market growth.
Marceli Passoni is a research analyst at Informa Telecoms & Media.
